Machine-to-machine (M2M) communications received a new lease of life after telecom service providers reorganized their traditional M2M solutions to enable a world of interconnected machines and objects, according to research firm Frost & Sullivan (Mountain View, Calif., U.S.A.). However, in a highly competitive market, M2M providers should look for new revenue streams for a sustainable market edge. According to a report by Frost & Sullivan, the next layer of M2M revenue opportunities for the ICT sector will come from M2M in Government and the Smart Cities concept.

Frost & Sullivan analysis finds that the M2M market in 2010 increasing almost 60% year-on-year to reach approximately 20 million M2M SIMs.

"Telco companies have built their growth by successfully targeting Tier 1 customers and expanding into new geographic markets in their operational footprint," says Yiru Zhong, Industry Analyst for Frost & Sullivan ICT group.

The Smart Cities concept, defined by Frost & Sullivan as an interconnected urban environment with citizens leading a fully digitalized lifestyle, can be further developed with a committed government hand in employing M2M technology. By setting up a conducive framework for leveraging different types of urban stakeholders, the government can also benefit from improved delivery of local government services and a positive environment to attract investments, according to the research firm.

"The government must play a critical role in overcoming any coordination issues by managing interests of various urban stakeholders such as energy service providers, environment services providers, transportation, tourism, and most importantly digital citizens," says Zhong. "The degree of smartness may currently be limited to the well defined M2M functions of track and trace, remote monitoring, status updates and security access. However, the future of Smart Cities depends on the rate at which new and smarter M2M applications can be developed for business critical processes in the above sectors."

With their reorganization to address M2M opportunities, telecom service providers are also seeking partnerships to roll out the Smart Cities concept. There are a few prominent examples of telecom service providers working with local city councils on electric vehicle charging or environmental service providers on smart energy services. The expectations are for telecom service providers to find a new and sustainable revenue stream in facilitating this beyond a pure connectivity perspective, says Frost and Sullivan.

The pace of eco-system development will depend on how quickly important partners are tapped in the various industry value chains, says the research firm. This is vital not only for companies to find the best possible candidates but also to establish first mover advantage by maintaining a level of exclusivity for a period of time.

"The implication on competitive dynamics within a wider M2M service provider space is the rate of new market entry," says Zhong. "As more telcos jump into the M2M space, competition will increase and the urgency to establish a market leadership in richer M2M applications becomes more critical."